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Hotspot report

Soliswiss Annual Analysis – Outlook on Global Developments

Worldwide, 01/03/2018 by Céline Neuenschwander

The annual analysis for 2018 provides an overview of current and emerging points of conflict and offers an assessment of their development. This issue focuses on the Middle East with its rivals Iran and Saudi Arabia, who both seek to control the region. Tensions are expected in Europe as well, however: Poland is rubbing its citizens and the EU up the wrong way with its policies. A look at Latin America shows that the coming months will be decisive for Brazil: elections will take place this year, all while investigations into the Petrobras scandal continue and some regions struggle with growing financial concerns. The annual analysis cannot claim to be comprehensive. Rather, it is intended to provide assistance to Soliswiss members, travelers and Swiss citizens abroad as well as highlight developments.

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For the Soliswiss Annual Analysis 2018 we were able to collaborate with the Swiss war journalist Alex Kühni. The photos for the texts of North Korea, Iran, Saudi Arabia and Kazakhstan were taken by him.

Soliswiss Annual Analysis 2018 – Hotspots of Conflict

  • North Korea
  • Iran
  • Saudi Arabia
  • Kazakhstan
  • Poland
  • Brazil

North Korea – More critical moments headed our way

Capital Pyongyang
Population 25,368,620 (2016)
Religions Atheistic state, 64.3% non-religious, 16% Korean shamanism, 4.5% Buddhists
one-party state, totalitarian dictatorship
Internet TLD .kp
Country Code
Source: OBS Advisory 

The crisis between North Korea and the USA consumed our thoughts last year, at times it seemed a military strike couldn’t be ruled out. The conflict has grown in proportions and its effects are now on a global scale. It is hard to gauge just how things will develop; unforeseen reactions from either statesman cannot be ruled out.

The conflict surrounding North Korea and its nuclear weapons has dominated the headlines since last year. For North Korean leader Kim Jong Un, nuclear weapons are necessary to justify his power over his own people and, in particular, to protect himself against possible disempowerment by the US. The overall goal of the US is the denuclearization of North Korea. For the reasons mentioned above, this is out of the question from North Korea’s point of view. In addition to its own retention of power, Pyongyang wants to abrogate the relationship between the US and South Korea. The American military bases in South Korea are a direct provocation on North Korea’s doorstep. North Korea’s intention is therefore to demilitarize the southern peninsula. The resulting scenarios of this fundamental position and the possible ensuing consequences for the world are discussed below.

The first course of action describes US recognition of North Korea as a nuclear power. Such a radical change of course would damage the USA’s international credibility and raise doubts among its allies. For its opponents, such a reversal of position may be interpreted as a weakness, resulting in rivals encouraging China to pressure the region’s US allies and make further territorial claims. This would not be an ideal course of action for the US and is therefore unlikely.

A second possibility would be a limited US military strike against North Korea, which would target the main military bases and strategic centers. The goal would be a short-term action to effectively damage North Korea and disable the country without engaging in a long war. As a result of a limited military strike, South Korea, the United States’ main ally in this conflict, would be exposed to North Korea’s aggression and suffer the greatest damage.  Even if the US could launch an effective limited military strike, it would eventually impair the US. Washington’s ability to protect its allies would diminish and it would portray itself as an untrustworthy partner.

The third option would be an open war between the US and North Korea. As stated above, this would be the worst-case scenario for both sides. The US cannot afford another drawn-out, costly war. Furthermore, there would most likely come a time when China would get involved. The costs of war would exceed the gains for everyone involved, resulting in negative impacts on their respective global position. Therefore, this scenario also seems unlikely.

The last course of action is the current status quo. This includes further sanctions and threats from the USA against North Korea. We can assume that neither Washington nor Pyongyang will achieve their main goal. North Korean military action against South Korea remains equally unlikely. We should expect further critical developments in the coming months, and cannot rule out the idea of unexpected actions from either statesman.


Iran – A rising regional power in the Middle East?

Capital Tehran
Population 82,801,633 (2016)
Religions Religion Muslim 99.4% (of which 90-95% Shiite, 10-5% Sunni)
Government Theocracy
Internet TLD .ir
Country Code
Source: OBS Advisory

The Islamic State group in the Middle East is considered to be defeated, leaving behind a shattered region that needs to be put back together. Iran wants to use this opportunity to secure its position as a regional power. But the country itself is struggling with economic issues that hinder any claims to power. Domestic unrest and the surrounding states are reacting to these claims and creating a future source of conflict.

Islamic State was declared defeated last November, but the conflict in the Middle East has not yet calmed down. Instead, the focus has shifted to a reorganization of structures and power influences. Iran now believes itself to be in an advantageous position. Islamic State, one of Iran’s main enemies, was ousted from its last bastion, while in Syria, the regime will remain in the power of Bashar Assad, an ally of Iran, at least for now. Iran is exerting a strong influence on its western neighbor Iraq through the army and Shiite militias. Furthermore, Iran’s regional archrival, Saudi Arabia, is concentrating on its own economic and political problems. It therefore seems like an opportune time to seize power. Iran’s long-term goal is to connect the Persian Gulf with the Mediterranean and establish itself as a leading power in the Middle East.

These ambitious foreign policy goals do not play into the hands of domestic concerns. At the beginning of the year, we received reports of protests and uprisings in Iranian cities. This was triggered by rising food prices. Political turmoil quickly developed against the head of state, Ayatollah Chamenei, and the Rohani regime. But the people’s deep-seated discontentment stems from the high unemployment rate and the unstable economy. Nothing has changed for the average Iranian since the agreement of the nuclear deal three years ago, nor have the repealed sanctions eased their everyday lives. This is fuel for their anger and social resistance and is driving the people to the streets over even the slightest changes.

The protests are considered a major red flag, but a revolution is currently unlikely to overthrow the regime. There are two important factors missing: first, participation in the riots was not always present, or of similar degree, across the entire population; second, Iranian security forces are currently well organized and faithful to the regime.

Even if an overthrow of the regime is unlikely at the moment, the protests have been a voice for the discontent of the people. President Rohani’s government feels pressure to create jobs and boost the economy. Regional claims to power, however, come with high costs and so are not in line with domestic goals. The most recent protests are therefore only a warning sign for the government. The cost of building an empire is too high for Iran.

The following months will clarify whether Iran is ready to soften its tone on its claims to power and instead invest in its own economy. It will not be an easy decision, in light of the area’s reorganization and regional power struggle. Investing too much in the regional claims to power while neglecting the economy creates a risk of intensifying domestic protests and causing them to spread to other groups within the population. Iran is therefore in a catch-22 situation: either improve their position in regards to regional power or alleviate the economic problems and growing discontent of the people. There is a certain security risk involved with either scenario.

Saudi Arabia – A country in danger of destitution

Capital Riyadh
Population 28,160,273 (2016)
Religions Muslim (85-90% Sunni, 10-15% Shiite)
Government Absolute monarchy
Internet TLD .sa
Country Code
Source: OBS Advisory

Low oil prices are putting Saudi Arabia in a precarious situation; once it set the pricing standard, but today it sees itself as a dependent with little influence. Financial difficulties are on the rise and the threat of empty public coffers is looming. Its much-praised Vision 2030 is said to lead the country out of oil dependence and diversify its economy. However, this requires reforms that many segments of society are unwilling to accept. But if there is no change in policy, public anger threatens to keep growing.

For Saudi Arabia, the victory over ISIS represents a reorganization in the Middle East with new options. Just like its regional rival, Iran, Saudi Arabia wants to claim control over the area. Iran’s growing strength is being critically observed by Riyadh. Last year’s show of force against Qatar on charges of making Iran-friendly statements also served as an intimidation attempt. Saudi Arabia thus made clear that it would not tolerate any rebellious states in the region. The fact is, Saudi Arabia feels increasingly threatened by Iran and is facing a growing number of Iranian allies in the region.

The proxy war between Saudi Arabia and Iran on Yemeni soil has already claimed an immense death toll. The war is also devouring Saudi Arabia’s financial resources. Nevertheless, a withdrawal for Saudi Arabia is out of the question; instead, attacks against Houthi rebels have been intensified. The direct border between Yemen and Saudi Arabia means retreating is a risky move. In doing so, Saudi Arabia might let Iran have the lead and thus invite its archrival right onto its doorstep.

The most serious problems for Saudi Arabia’s monarchy – under the young Crown Prince Bin Salman – are of a domestic nature. The persistently low oil prices, problematic since the 2008 economic crisis, are also belaboring the oil exporter. New and diversified sources of income will be necessary, otherwise there is a threat of economic failure. Without income from oil, Saudi Arabia will have to explore new forms of legitimacy. To do so, it can either establish itself in the minds of the people as a stronghold against chaos and Western values or it can use reforms and increased political participation of its citizens as a platform to position itself.

Herein lies the challenge. Since the Arab Spring, a growing number of young Saudis have yearned for transparency, democracy, and the right to have a voice. The gap between rich and poor is growing steadily, the unemployment rate is already around 40%, and every year there are half a million young Saudis that need to be integrated into the labor market. Up to now, the Saudis have lived tax-free, but in exchange for their political voice. With sinking oil revenues, this will not be the case for much longer. As an initial measure, Bin Salman introduced VAT for the first time last year to cover the lack of revenue in the state budget. More taxes are expected to be introduced gradually. This may be met with resistance unless civil rights are expanded in turn.

Saudi traditionalism and Wahhabism, the Saudi state religion, are opposed to the expansion of civil rights. They threaten the crown prince and hinder reform whenever they can.

The outlook for Saudi Arabia is complicated, from both a foreign and domestic policy perspective. The proxy war in Yemen will continue according to expectations. Saudi Arabia cannot afford a retreat or concessions to their archrival Iran, much less on their own doorstep.

At the same time, domestic political pressure is growing for the 31-year-old crown prince. It is nearly impossible for him to implement political reforms against the will of traditionalists. As a result, some reforms will have to be put on the back burner. Nonetheless, he has to diversify the economy and create new streams of revenue. The desire to have democracy and transparency is still a key value for the majority of Saudi youths. If additional taxes and levies come into play, this could easily trigger public anger.


Kazakhstan – Central Asia is coming into focus

Capital Astana
Population 17,987,736 (2016)
Religions Muslim 70.2%, Christians 26.2%, atheists 2.8%
Government Constitutional Republic, one-party system
Internet TLD .kz
Country Code
Source: OBS Advisory

Up to now, there has been little to be heard about the Central Asian region in European media; this is likely to change in the future. This strategically important area, which lies between Russia, China and the Middle East, will play an increasingly important role in global politics. Kazakhstan, in particular, is the focus here. Will the country be able to establish itself independently or be a pawn in the interests of its surrounding neighbors? 

Central Asia forms the region between the politically important regions of Russia, China and the Middle East and consists of the following five countries: Kazakhstan, Turkmenistan, Tajikistan, Uzbekistan and Kyrgyzstan. It was also part of the former Soviet Union. Russia continues to exert political influence on the region and uses it as a buffer zone between itself and the surrounding countries. According to our assessments, Kazakhstan – the most influential country in Central Asia since the dissolution of the Soviet Union – will take on a more important role.

In order to understand the potential for conflict, it is imperative to take a closer look at Kazakhstan itself as well as its interests in the region. The country is subject to the strictly authoritarian leadership of President Nazarbayev, who has ruled the country for almost 30 years. It is unclear who the successor of the 77-year-old will be and this poses political threats. The oil exporter is suffering from falling oil prices and the resulting instability. One consequence of this was a fuel shortage last year. Water is also scarce in Kazakhstan. There is an ongoing conflict with Kyrgyzstan over the trans-boundary river and the associated water distribution between both countries.

Protests and uprisings in the recent past have been brutally suppressed by the Nazarbayev government. This has oppressed and disillusioned the Kazakhstani youth, creating fertile ground for extremist groups to recruit from.

This is one of the reasons influencing the region’s instability. Jihadists from the Middle East and Afghanistan are geographically close and Kazakhstan has become a recruitment area for Islamic State. The predominantly young and Muslim population, which currently has no prospects, is more susceptible to the radical tendencies ISIS disseminates. An increasing concentration of radical Islamic followers is also posing a security risk for the country and the region itself.

Russia is carefully observing the aforementioned change about to take place in Kazakhstan’s higher echelons. Russia’s influence on the former Soviet states is diminishing, however, especially since Russia is now focusing on its upcoming presidential election and is itself suffering from financial difficulties.

China is hot on the heels of Russia’s dwindling influence, and is showing a growing interest in the region. China’s main project, the “New Silk Road”, is intended to establish a direct link between the Middle Kingdom, Central Asia and Europe. The easiest and fastest route leads through Kazakhstan, which is said to be well-disposed toward the Chinese and explains China’s interest in the country.

Lately, Kazakhstan has also caught India’s eye, a strong competitor of the Chinese, who refuses to stand by idly watching the “New Silk Road” project. It is therefore very likely that India will also try to influence Kazakhstan in order to stop rival China’s plans.

On the surface it may seem relatively calm in Central Asia, but the structures show a clear potential for conflict, which can affect the region and the security of the people. Radical extremist groups, an authoritarian state and the unresolved question of the assumption of power, as well as the weighty interests of the surrounding major powers – the factors indicate a future source of conflict.


Poland – A year of political turbulence is on the horizon

Capital Warsaw
Population 38,422,346 (2017)
Religions Catholic 87%, Orthodox 1.3%, Protestant 0.5%
Government Semi-presidential democratic republic
Internet TLD .pl
Country Code
Source: OBS Advisory

Since the conservative Law and Justice Party (PiS) claimed seats in parliament, the political climate in Poland has become difficult. PiS party measures have undermined the rule of law as well as Poland’s separation of powers. These controversial policies are deliberately fueling conflicts with the EU and Germany. The volatile political climate, the frictions with the EU and the controversial measures will not grant Poland any peace and quiet this year.

For a long time, Poland was considered the poster child for economic development in Europe. Poland grew to be a popular manufacturing location for companies from all over Europe. However, an increasing number of jobs from the service sector were also outsourced to Poland. As a result, the country was regarded as a driving force and even survived the 2008 financial crisis without any major damage.

The parliamentary elections in 2015 saw the Law and Justice Party achieve astounding results, winning an absolute majority of parliamentary seats. Conflicts with the EU have been growing ever since. The judicial reform, which was adopted last December, can be seen as a concrete cause for criticism. Two of the reform laws passed allow for parliament to take part in determining the members of the Supreme Court. Critics claim that this reform enables the PiS party to bring the judiciary branch under its control and ultimately undermine the separation of powers.

It wasn’t long until protests were taking place over the PiS parliament’s actions. Thousands of Poles demonstrated against the judiciary reform in a number of rallies and protest marches. For the first time, the EU responded with proceedings in accordance with Article 7 of the EU Treaty against one of its member states after months of admonition proved ineffective. This allows the EU to impose sanctions on Poland, since Poland’s action goes against the values represented by the EU. In doing so, the EU wants to ensure its credibility and the democratic values which are the cornerstones of its existence. The sanctions could go so far as to exclude Poland from the EU decision-making process.

From Poland’s point of view, the PiS was democratically elected, making its policies legitimate. The roots of Poland’s dissent from the EU and its economic stronghold, Germany, run even deeper, however. The EU’s proceedings against Poland are seen as an interference in its own policies and autonomy. This depiction adds fuel to the fire for those who maintain an anti-EU rhetoric. The EU, however, requires all Member States to uphold its values.

Both sides see themselves as being confronted with the difficult situation that this presents, thus escalating the conflict.  On the one hand, Poland believes its autonomy is being subverted. On the other hand, the EU must defend its credibility and democratic values. The situation makes it difficult for either side to soften their tone. Further disputes are therefore expected in the upcoming months. The unstable situation is also having a negative impact on investor sentiment in Poland. The damage caused by the quarrel with the EU, as well as the resulting consequences, is being borne by Polish citizens.

Brazil – Scandal followed by Elections

Capital Brasilia
Population 205,823,665 (2016)
Religions Roman Catholic 64.6%, Protestant 22.2%
Government Presidential democracy
Internet TLD .br
Country Code
Source: OBS Advisory

Brazil has been rocked by the far-reaching Petrobras scandal over the past four years. The corruption scandal had broad ramifications for the political class and led to the dismissal of then-President Dilma Rousseff. Since then, there has been a power struggle raging in Brazil. The country is also struggling with financial difficulties that are affecting the population. While the situation in Brazil simmers, the elections are getting closer, with unforeseeable results.

It all began with a small investigation into money laundering and turned into the biggest corruption case in Brazilian history: the Petrobras scandal. It consumed the political elite and led to the dismissal of then-President Dilma Rousseff. This led to a change of course within Brazilian politics. The left-wing populist Worker’s Party (PT) split after Rousseff’s departure. Ever since, there has been a continuous struggle for power between the parties in Brazil.

However, the country faces not only political but economic problems as well. Michel Temer, acting president and Rousseff’s successor, introduced comprehensive economic reforms after his takeover. His goal is to put the country back on track economically and at long last accelerate growth. Temer needs the support of parliament to introduce reforms. This support is ever-dwindling, however, as Temer has recently been confronted with corruption allegations of his own. The necessary reforms will therefore be difficult to implement, making recovery all but impossible.

The investigations into the corruption scandal are not yet over; further revelations are still to follow. There are grave consequences: each arrest of a politician or business person paralyzes the whole system. This triggers a domino effect of setbacks. What’s more, the Petrobras scandal is impacting the whole of South America, as the companies involved are international, often awarding large contracts across the continent.

Until recently, the Brazilian population had remained calm, despite the revelations of corruption and the economic crisis. But the situation is tense. If the economic situation in Brazil does not improve, the discontent will most likely manifest itself on the streets. The political climate has been heating up, especially now just before the upcoming elections, and the desire to demonstrate has likewise escalated.

The ongoing financial difficulties are also continuing to take their toll on the mood of the people. The austerity measures, the revelations of corruption and the sinking oil prices are the reasons behind the financial problems. The constituent state of Rio de Janeiro has been in need of payment since 2016 and is reliant on financial support from the capital, Brasilia. A number of state employees are waiting for their wages and the situation is tense. The payment defaults are also affecting security forces, with serious consequences for the safety of the local population. If the financial problems spread to other states, Brazil could sink into a deeper recession, accompanied by consequences for security and crime rates.

The factors of uncertainty as discussed here are a burden on Brazil, and it is in this mindset that the country heads towards its elections. It is difficult to anticipate the consequences at this point. President Temer is struggling with dwindling support from parliament, which hampers the implementation of important measures. The investigations into the Petrobras scandal are not yet over; further revelations are expected to surface, with crippling effects on the entire system. Defaulted payments could mobilize the masses and the exasperation could erupt onto the streets. The developments over the coming months will be decisive for Brazil’s future.



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